I always aim to add to my portfolio during market corrections. Although it’s uncomfortable to see share prices falling so sharply, over the years these situations have created some of my best long-term buying opportunities.

A bargain retailer with a 7% yield?

The first company I’m interested in is sofa and carpet retailer SCS Group (LSE: SCS). This stock hit an all-time high of more than 300p in August last year, but has since fallen more than 40% to around 185p.

I’m surprised by the size of this fall. SCS has continued to trade well through the winter, even as life has returned to normal and travel and experience spending has increased.

In its latest update, SCS reported a 17% increase in orders for the six months to 29 January, compared to a year earlier. Helpfully, the company also included a comparison with the same period in pre-pandemic 2019/20. This showed new orders are now at the same level as they were before Covid-19 started to cause problems.

The main risks I can see at this time are rising prices and pressure on incomes that could cause people to cut back on home spending. As we head into the main holiday season, people might also be planning trips abroad rather than buying new sofas.

Even so, I think that SCS now looks too cheap for me to ignore. The latest guidance from the firm is that profits should be in line with expectations. That prices the shares on less than seven times 2021/22 forecast earnings, with a 6.9% dividend yield. I’m tempted to add this penny stock to my portfolio at this level.

A defensive business in uncertain times

One area where our shopping habits don’t change much in difficult times is the supermarket. My next pick, Finsbury Food (LSE: FIF), produces a wide range of bread and cakes for retailers across the UK.

Finsbury produces staple everyday items and affordable treats. In my view, shoppers are unlikely to ditch them from their shopping trolleys, even if prices rise slightly.

I think pricing power could be an important consideration over the coming months, unfortunately. The war in Ukraine has pushed up energy costs and commodity prices, notably wheat, which is a key ingredient for Finsbury.

Fortunately, I think Finsbury is in good shape to handle inflationary pressures. The company says it was able to pass on price increases during the second half of 2021. This is expected to result in higher profits in early 2022.

Although this improvement may now be smaller than originally hoped for, I think Finsbury’s share price already reflects this risk. The stock has fallen by nearly 20% since the start of the year, leaving the company trading on a modest eight times forecast earnings. There’s also a useful 3% dividend yield, which looks safe to me.

I already own Finsbury shares, but I’d be comfortable buying more at current levels.

A play on gold

The price of gold has risen 7% over the last month to more than $1,900 per ounce. Although I’m not generally a gold investor, I can see the attraction of owning the metal during uncertain times.

I’m thinking about adding some exposure to my portfolio by buying shares in pawnbroker H&T Group (LSE: HAT). H&T is exposed to the price of gold through jewellery retail and its scrap gold business, which operate alongside its core pawnbroking business.

One risk here is that H&T’s operations have quite a lot of moving parts. Profits from trading gold might rise, but other areas of the business may underperform. Even so, I think this company is well positioned to deliver an improved performance in 2022.

The company says that gold trading volumes improved during the final quarter of last year. Second-hand watch and jewellery sales “exceeded expectations” over the Christmas period, with retail sales in general now back to pre-pandemic levels.

Broker forecasts suggest H&T’s earnings will rise by as much as 50% this year, with further gains pencilled in for 2023. These estimates price its shares on nine times 2022 earnings, with a potential dividend yield of 4.4%. I’m tempted to buy a few for my portfolio.

A penny stock Peter Lynch would buy?

In his book ‘One Up on Wall Street’, famed US growth investor Peter Lynch advised investors to buy what you know. He pointed out examples of high street brands that had gone on to become huge successes, long after they appeared in his local neighbourhood.

I think this remains a useful tip today. One consumer stock I’m considering is discount retailer Shoe Zone (LSE: SHOE). This group sells through stores and online and is focused on the cheaper end of the footwear market.

Although Shoe Zone sells some branded names, the majority of its stock is made directly for the firm by contract manufacturers. This locks in attractive profit margins, despite Shoe Zone’s low pricing points. I’ve bought a few pairs of shoes from my local store and have no complaints, for the price.

I should point out that Shoe Zone survived a near-death experience early in the pandemic. The company’s online presence was lagging and a number of its stores became unprofitable.

One risk I can see is that the group’s recovery will hit a limit and that profits will come under pressure again from rising costs. I believe much of the firm’s stock is made in China so increased shipping costs and delays could cause problems.

However, so far, I think founders John and Anthony Smith have delivered an impressive turnaround. They’ve improved online performance, closed 50 unprofitable stores and updated others to more profitable formats.

Shoe Zone’s share price has doubled since October. The shares aren’t a screaming bargain anymore, but I still think they look good value. A price/earnings ratio of 12 doesn’t seem too high to me for a business that has been very profitable in the past. I’m tempted to start buying this penny stock for my portfolio.

The investment case

In the recent full-year results to 2 October (FY21), revenue actually declined to £119.1m (from £122.6m in FY20). However, the company was still heavily disrupted due to lockdowns and only traded through its stores for 36 weeks, or five weeks less than the previous year. But it was digital revenue that was most impressive. This increased by over 50%, from £19.3m, to £30.5m in FY21.

Shoe Zone has been improving this sales channel over the pandemic, and sees it as a key growth area. Indeed, it said: “Our decision to invest in infrastructure and people pre-pandemic enabled us to take advantage of the change in buying habits and to cope with the increase in volumes through our digital shoehub platform.”

Digital returns rates are also very impressive at only 8.4%. This is a good sign because high returns rates have significantly impacted Boohoo’s sales recently.

Another thing that stood out to me in the recent results is that Shoe Zone has been able to reduce the rents it pays by renegotiating leases on its stores. Rent payments will now be 58% lower, which equates to £1.8m in annual cost savings. Not only this, but it’s closed 50 unprofitable stores. Therefore, Shoe Zone is coming out of the pandemic a much leaner business, with a growing digital offering.

Finally, the dividend should be reinstated soon. It was stopped during the pandemic as the company was loss-making, and made use of a government loan. But Shoe Zone is now debt-free and expects to recommence the dividend this year.

There are still risks though

One of the main risks to Shoe Zone is competition. There’s little to differentiate it against rival businesses. It competes heavily on price, but others can do the same. So it could lose market share. Inflation and UK economic issues would likely impact spending by its price-conscious customers, and hence its profits (although it could also benefit from shoppers trading down). And of course, another strain of Covid could lead to further restrictions.

However, a key strength of the business is the leadership team. The current CEO and chairman have been at the company since the 1990s and both own a significant number of shares themselves. This gives me confidence that their interests are fully aligned with those of shareholders.

Taking everything into account, I view Shoe Zone as one of my best stocks to buy on AIM. It’s a more streamlined business today, with a much better digital offering. The dividend is also an added benefit. I’d add to my position in my portfolio.

Growing digital sales

Shoe Zone (LSE: SHOE) is a UK-based footwear retailer. The company sells via an estate of some 410 stores nationwide and its website, shoezone.com.

In January, with its full-year results report, the company posted a healthy profit after recording a loss in 2020. And a big growth area has been the 58% increase in digital trading during the period. Online sales generated revenue of £30.5m in the 12 months to 2 October 2021 — just under 26% of total revenue.

The company reckons its decision to invest in infrastructure and people before the pandemic enabled it to capture digital sales when customers buying habits changed. And I see the growth of e-sales as a positive for this business.

However, although revenue and cash flow both have a positive trajectory, earnings have been patchy. And the company isn’t paying shareholder dividends at the moment.

Nevertheless, I’m keen on the stock for its growth potential. And with the share price near 150p, the forward-looking earnings multiple is just below 14 for the trading year to October 2023. I’d describe that valuation as fair and I would aim to buy a few shares on dips and down-days to hold for the long term.

Diversified and growing sales

Harry Potter publisher Bloomsbury Publishing (LSE: BMY) produces academic, educational, fiction and non-fiction publishing for consumers, children, students, teachers, researchers and professionals.

In January’s trading update, the company said it expected revenue for the year ending 28 February to be “comfortably ahead” of the market expectations. And the news on profits was even better with the directors expecting them to be “materially ahead”.

City analysts expect earnings to grow by about 8% in the trading year to February 2023. But estimates are not guaranteed and it’s possible for Bloomsbury to miss its forecasts. However, with the share price near 372p, the forward-looking earnings multiple is just under 17 when set against analysts’ expectations. And the anticipated dividend yield is about 2.6%.

The valuation looks quite full to me. But I like the firm’s quality indicators and its strong balance sheet. For me, Bloomsbury makes an attractive candidate as a long-term hold.

Well-placed to benefit from infrastructure spending

Construction company Galliford Try (LSE: GFRD) operates a cyclical business. And that kind of set-up comes with risks for investors. But I think the firm is well-placed to benefit from infrastructure spending and could see a boom in its business in the coming years.

In January, the company issued an “in-line” trading update and a bullish outlook. The directors reckon Galliford Try is “well-placed to benefit from increasing Government investment in economic and social infrastructure”. And the firm’s pipeline of work with high-quality private sector clients is also “robust”.

City analysts expect earnings to increase by about 18% in the trading year to June 2023. And with the share price near 180p, the forward-looking earnings multiple is just under 11 when set against that forecast. And the anticipated dividend yield is around 3.9%.

I think that valuation looks fair. And I’m also encouraged by the company’s strong balance sheet with its robust net cash position. In conclusion, I’d be happy to make this stock a core holding in my portfolio with a five-year-plus investment horizon in mind.

Former penny stock on the rise

The Shoe Zone (LSE:SHOE) share price has been surging recently. As I write, the shares are trading for 1,42p. At time last year, the shares were very much in the penny stock category, trading for 51p. A return of 178% over 12 months is impressive.

Shoe Zone is a men’s, women’s, and children’s shoe retailer with over 500 stores in the UK and Ireland, and employs 4,000 people. In light of the recent e-commerce boom, it also has an online store and offering which is vital to success due to the changing shopping habits of consumers as well as evolving technology.

Why I like Shoe Zone

Retail and the high street have taken a beating over the past few years. Online disruptors to the retail market coupled with more choice have placed pressure on bricks-and-mortar retail. The tide seems to be turning somewhat, however. Recent economic conditions such as rising inflation and energy costs as well as the pandemic has placed pressure on the wallets of many households. Budget retailers like Shoe Zone seem to benefiting. Shoe Zone’s extensive store presence coupled with its online offering provide it with a good platform from which to reap the rewards of the need for budget footwear.

Shoe Zone’s performance recently and historically has been promising. I do understand past performance is not a guarantee of any future performance, however. Looking back, revenue increased year on year for three years prior to the pandemic affecting 2020 results. Most recent audited full-year results were released earlier this month. Before the audited results were released, the initial update in October caused the share price to surge and the Shoe Zone share price to surpass penny stock levels. Revenue was very close to 2020 levels which is encouraging due to 2020 trading being disrupted. Tellingly, online revenue increased substantially compared to 2020 levels. 2020 was a loss-making year whereas in 2021, Shoe Zone recorded a £14m profit. A big bonus for me as a potential investor is the company is debt free.

Risks and final thoughts

The biggest threat to Shoe Zone’s progress in 2022 and beyond is that of the pandemic. Many of its stores were closed when restrictions were tightened earlier in the pandemic. With the threat of new variants and fresh restrictions still lingering, this could impact the balance sheet and share price performance.

Overall I think Shoe Zone could be a good addition to my holdings and I would buy shares today. I wish I had bought them sooner when they were still a penny stock. I expect trading in the months ahead to be excellent, barring any restrictions, and would not be surprised to see 2022 results surpass 2021 and pre-pandemic results. At current levels, the shares look cheap too with a price-to-earnings ratio of just 10.

Gas giant

The hydrogen fuel cell market could be set for spectacular growth as demand for low-carbon energy rises. I’m thinking of buying shares in Proton Motor Power Systems (LSE: PPS), the manufacturer of stationary power units as well as fuel cells for cars, boats and trains, to realise these opportunities.

Analysts at Researchandmarkets.com have estimated that the global hydrogen fuel cell market could be worth $16.5bn by 2025. That’s up considerably from the $3.9bn it’s currently valued at. Promisingly, Proton continues to rack up contract wins and last month announced that a subsidiary of German rail operator Deutsche Bahn had ordered one of its modular fuel cell systems.

I think Proton could be a top buy for 2022 and beyond. Though I am mindful that the business still faces colossal competition from manufacturers of familiar power technologies like internal combustion engines and wind turbines.

Brogue trader

Soaring inflation means that value for money will become increasingly important to shoppers in 2022. This is why I’m thinking of buying Shoe Zone (LSE: SHOE) for my investment portfolio. This retailer sells a wide range of footwear at cheaper prices than much of the high street (an average of £10 a pair).

Shoe Zone already has a head of steam heading into the new year as inflation pressures consumer confidence. Last month it hiked its profits forecasts for the financial year to September 2022. I don’t just think the low-cost retailer is simply a good buy for the near term however. Studies show that the importance of value to shoppers has grown strongly even before recent economic downturns.

My main concern for Shoe Zone is the prospect of Covid-19 lockdowns that could shutter its 400-odd stores. The retailer sources just a quarter of group revenues from its website. Shoe Zone trades just outside penny stock territory at around 105p per share.

Ground control

I think Van Elle Holdings (LSE: VANL) is set to ride the construction boom in Britain. As a provider of ground engineering services for housebuilders, it’s in pole position to benefit from the residential building boom. The UK needs to build 345,000 new homes a year, according to estimates, and Britain’s housebuilders are ramping up production to ease the shortfall.

Furthermore, Van Elle offers geotechnical expertise in rail, utilities, roads, airports and power generation projects (including renewable energy assets), as well as other types of essential infrastructure. Its knowledge in critical projects like these provides a layer of security to investors. It can expect demand for its services to remain stable, regardless of broader economic conditions.

A high-profile service failure is a constant operational risk facing Van Elle. It could have serious implications for profits and cause severe damage to the company’s business. Having said that, it’s my opinion that this penny stock remains highly attractive from a risk/reward perspective.

Unfortunately for my portfolio, I held the stock heading into the pandemic. The returns weren’t pretty. The share price crashed over 80% from its peak, and the dividend was stopped too.

But I held the shares throughout, and still do today. Recently, the price has been recovering, and rallied again this week.

Let’s see if I should carry on holding the stock.  

The business

Shoe Zone is a footwear retailer, selling shoes for all ages from over 400 stores nationwide. It sells over 16m pairs of shoes each year with an average retail price of £10. It’s a budget place to pick up footwear, depending on high sales volumes to generate profit.s

What went wrong

It’s easy to see why the business suffered because of the pandemic. When shops were closed, Shoe Zone was not able to sell its footwear in anywhere near the volumes it needed to turn a profit. Across the 12-month period ending in October 2020, sales declined 24% to £122.6m, but profit plunged from £6.7m to a loss of £14.6m.

The business also didn’t have a good online presence, relying heavily on its network of stores. Digital revenue did increase by 82% over the lockdown period, but still only came in at £19.3m.

What’s going right

The share price is up a huge 200% since the pandemic low, so things must be looking brighter. At the time of writing the share price is 110p, but this remains under 180p which is where the price was before the March 2020 drop.

Recently, trading has been looking much better. The company issued two full-year updates in October and November, with the first saying profit before tax will be at least £6.5m. Considering the profit before tax in the fiscal year to 2019 was £6.7m, this is a good result. What’s even better is that digital revenue has grown again by 58.5%, and now represents almost 26% of total sales. This diversifies the business if another lockdown happens simply in the ‘new normal’ where shoppers are going online more often.

In the November update, Shoe Zone said profit before tax is now expected to be in the range of £9m to £10m (but with some favourable currency movements and lower pension contributions helping). That’s a great result, and shows that the business is really picking up again.

The shares are on a price-to-earnings ratio of 9, which I consider value territory.

Looking ahead

Holding shares of Shoe Zone has been difficult over the pandemic, but things appear to be turning around. I also like the fact that the CEO and chairman own over 24% of the company, so their interests are aligned with shareholders.

I’m still cautious about the recovery though. Any further lockdown or disruption will severely impact the business, but the increase in digital sales does mitigate this to some degree. I’m going to keep holding the shares for now.

Shoe Zone share price spikes after results announced

The demise of bricks-and-mortar retail has been well documented in recent times as online disruptors dominate the market. Booming inflation has affected consumer confidence. Inflation and the rising cost of living has pushed consumers to look for more bang for their buck. I have written about other retailers who still continue to do well, however.

Shoe Zone is a budget shoe retailer with over 400 retail stores and an online presence too. The Shoe Zone share price rose by 25% this morning to 80p as I write. At this time last year, shares were trading for 45p, which is a 77% return.

Positive full-year results

Shoe Zone reported that revenue had actually fallen to £119.1m compared to FY 2020 levels of £122.6m. This was partly due to retail stores being open less compared to previous years as a result of restrictions. Digital revenue grew substantially to £30.6m, an increase of 58.5% compared to FY 2020 and 188% on FY 2019. Net cash increased to £14.2m, up from £6.3m in 2020. Profit before tax is expected to be no less than £6.5m. It also confirmed an intention to restart its dividend payments.

Shoe Zone’s growth in digital revenue is worth noting. It is moving with the times as well as maintaining its retail presence. It also has plenty of cash reserves and no debt on the books.

Two big dividend payers on AIM are Shoe Zone (LSE:SHOE) and Highland Gold Mining (LSE:HGM). Let’s take a closer look at their financial outlook. 

One step forward, two steps back

Shoe Zone appears on many British high streets. It’s a warehouse-style store filled with cheap and cheerful shoes for all the family.

The Shoe Zone share price is up 12% year-to-date. This could, in part, be thanks to the ‘Boris bounce’, which has boosted many high street retailers after the Conservative election win in December.

It employs over 4,000 people in over 500 stores throughout the UK and Ireland. Shoe Zone has a £90m market cap, and its price-to-earnings ratio (P/E) is 16, but its earnings per share have fallen to 11.4p from 19p in 2018.

In January it reported a rise in full-year revenue, but profits fell because of price hikes in British business rates.

Its dividend yield is an attractive 6% but I’m not convinced it’s worth the risk. Unfortunately, this is another British retailer at the mercy of high business rates and decreased footfall. 

Shining bright

With gold prices heading north, it may tempt you to invest in a gold mining company.

Highland Gold Mining is an AIM-listed stock with a £766m market cap. It offers a 5% dividend yield, while it’s P/E is 11 and earnings per share are 19p.

It’s worth noting that its dividend cover is less than 1, which is not ideal. This means the dividend could be at risk of a future cut.

Prior to December, Highland Gold was selling its gold to commercial banks. Now it’s become a producer on the MOEX Precious Metals Market in Moscow. It’s the first gold producer to do so and it means an additional income stream through this supplementary market.

Highland’s total gold production through the first nine months of 2019 increased by 7% compared to the same period in 2018.

The share price is up nearly 30% in the past year, but it’s a volatile stock to own. With gold prices as high as they are, I’d be concerned of a pull-back if the gold price goes into decline. I think this is too risky for me.

AIM: on target?

AIM shares are listed on the London Stock Exchange, just like the FTSE 350 companies. AIM shares are much riskier than FTSE shares because there is usually less liquidity in the market.  This means they can be difficult to sell quickly. 

Choosing AIM stocks with a dividend is a good strategy in theory, because the dividend yield brings additional returns to your investment, helping to offset any associated risk. As much as I love both gold and shoes, I think we can find safer share purchases, with attractive dividend yields, among the FTSE 350 stocks. 

I like that both these companies have been established for a while. However, they each have very low dividend cover and a volatile share price history. They’re not for me. 

City brokers expect the company’s earnings to leap 57% in the fiscal year ending September 2020. This leaves it trading on a rock-bottom forward price-to-earnings ratio of 10.3 times. And to put a cherry on top, Shoe Zone carries a bulging 6.2% dividend yield, too.

I love a good growth and income share but I’m not tempted to buy Shoe Zone. Fresh trading data this month hasn’t boosted my appetite  either. Pre-tax profits dropped to £9.6m in fiscal 2019 from £11.3m previously, driven by flattish revenues and a rise in store-related costs.

That low earnings multiple suggests that this retailer is one of those classic ‘dividend traps.’ With the retail sector stuck in first gear I fear that some sizeable downgrades to analyst estimates could be just around the corner.

A better growth buy

In my opinion Springfield Properties (LSE: SPR) is a much more attractive low-cost growth stock. This is not only because the housebuilder’s forward P/E ratio of 9.5 times beats the retailer’s corresponding reading. It’s because its earnings outlook is much stronger for the near term and beyond.

While issues like mounting competition, rising costs, and a drawn-out Brexit process cast a shadow over Shoe Zone, the huge supply and demand shortage in the UK housing market promises to keep Springfield’s bottom line moving higher well into the next decade.

Pre-tax profits jumped 69% in the fiscal year to May 2019, even as the threat of a no deal withdrawal from the European Union loomed.

Put a spring in your step

It’s no wonder that City analysts expect Springfield’s decent record of annual profits to keep rolling, then. A 9% earnings rise is predicted for the current financial year, and an 11% increase is forecasted for fiscal 2021.

The Scottish builder is preparing to deliver solid growth beyond the immediate term, too. Huge investment in its land bank of late gives it work until the mid-2030s. And it has planning permission to build on more than a quarter of its bank (of 15,938 plots as of last May), too.

Meanwhile, the acquisition of Walker Group in 2019 has boosted its geographic footprint north of the border to facilitate future growth. Last year also heralded a significant strategic move when it signed a collaboration with Sigma Group to deliver private rented homes in Scotland. This is the first agreement in this sub-sector for Springfield and one which targets “the release of hundreds of homes over the coming years.”

There’s plenty of reason to be excited over the homebuilder’s earnings outlook for the years ahead, then. Combined with that low valuation and a bumper dividend yield (of 4%), I reckon Springfield is a brilliant all-rounder to buy for your ISA today.

Shoe Zone (LSE: SHOE) is one big yielder that has attracted improved buyer interest of late and it’s easy to see why. City predictions of a 15% earnings rise in the current fiscal year (to September 2020) leave it dealing on a forward price-to-earnings (P/E) ratio of 7.3 times. And with this comes expectations of more dividend growth, resulting in a giant 9% dividend yield.

Demand for Shoe Zone shares picked up after a reassuring financial update in late October, one in which the AIM-quoted retailer said that revenues rose fractionally in the last fiscal year to £161.9m.

However, I’d advise investors not to get too excited. The release follows on from a profit warning over the summer, a shocking release that forced chief executive Nick Davis to resign with immediate effect.

And judging from latest Office for National Statistics retail sales data this week, numbers which showed sales grow at the slowest rate since spring 2018 in the three months to October (at 0.2%), there’s plenty of reason to keep giving Shoe Zone a miss. The chances of its share price sinking again are far too high for my liking.

A better fit

Conversely, Centamin’s (LSE: CEY) share price has swung lower in recent weeks as gold values have weakened on market hopes of a trade deal breakthrough between Beijing and Washington. I believe that this represents a terrific buying opportunity, as the chances of a sharp snapback in bullion prices is strong.

The boffins at UBS certainly believe gold could be on the cusp of a comeback. They commented this week that “the bar remains high for a full trade resolution.” and so predict that the yellow metal will barge through the $1,600 per ounce marker in 2020. This is up from recent levels around $1,460.

Indeed, they see no reason for alarm following this recent weakness as they believe that “the recent consolidation in prices and positioning is healthy and prepares the market for another leg higher.”

Gold star

And why wouldn’t they be optimistic? The factors that propelled gold values to six-year peaks over the autumn remain very much in play, from those fears over prolonged US-China trade bickering (and the possibility that President Trump will put his European trading partners in the crosshairs next), to the probability of more central bank rate cuts and a subsequent rise in inflationary concerns, to Brexit uncertainty stretching through 2020, to the possibility of key European economies moving into recession, to China’s economy continuing to sputter.

The bulk of City analysts certainly reckon on prices of the safe-haven metal remaining robust next year and consensus suggests that earnings at Centamin will rise 43% in 2020. This has two positive knock-on effects: firstly it leaves the FTSE 250 business trading on a forward price-to-earnings growth reading of 0.4. Secondly it leads to predictions of more excellent dividend growth, leaving Centamin with a giant yield of 6.3% for next year. I’d happily buy Centamin shares in the hopes of big dividends now and in the years ahead.